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Business leaders slam Govt rescue mission - papers

Britain's business leaders criticised the government's latest rescue mission and warned that ministers are still failing to understand the depth of the country's financial problems, according to The Telegraph .

Stanley Fink, the former boss of Man Group and the newly appointment Tory co-treasurer, said: "I am pretty disenchanted with the way Labour has handled this - there's often an appearance of action rather than grappling with the problems themselves. The government has been too simplistic."

Leading institutional investor Peter Gibbs, of Jupiter Asset Management said: "The market and government policy makers have consistently under-estimated the depth of the banking crisis and its effects on the economy. We are still at the early stages of the global recession, with the implications of rising unemployment and falling house prices just being felt."

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The City welcomed the government's efforts to improve liquidity but bosses complained that the complexity of the plans and the lack of detail of how they would work had not helped improve confidence.

BRITAIN'S ECONOMY IS about to suffer its most vicious slump since 1946, shrinking by a drastic 2.8 per cent this year, Brussels warned yesterday, as fears over the scale of the recession mounted despite the new banking bailout, reports The Times.

In a dire assessment that threatens to leave Alistair Darling red-faced at a meeting of European Union finance ministers today, Brussels predicted that the UK would suffer the worst recession of any large European economy.

The European Commission's grim forecast of Britain's outlook points to a toll this year more than twice as bad as the worst-case scenario in the Chancellor's Pre-Budget projections. Mr Darling had pinned his hopes on GDP falling by no more than 1.25 per cent, although he has admitted since then that this rosy view would have to be ditched. The warning is the most authoritative yet that the economy's plight will prove far worse than the Treasury has acknowledged. It comes as a growing number of independent economists are predicting a contraction in GDP of 2.5 per cent or more this year.

ROYAL BANK OF SCOTLAND chief executive Stephen Hester may be forced to accept a lower offer for its insurance division due to renewed pressure on the bank to raise funds, says The Scotsman.

Banking analysts say Hester would prefer to hold on to its Direct Line, Privilege, Green Flag and Churchill businesses as he believes they are strong performers and will help him rebuild RBS as a strong UK financial services group.

But RBS is believed to be at the core of the Government's thoughts about creating a "bad bank" to take on toxic assets and help the sector recover.

With the banks possibly requiring further taxpayer support, Hester is likely to have no choice but to sell the insurance division for the best offer, say analysts, which could be well short of the £7bn price tag placed on the business last April.